Adapting & Thriving in an Age of Digital Disruptionyour2.capgemini.com/siemens/files/2014/06/Vortrag-D... · · 2014-06-11Adapting & Thriving in an Age of Digital Disruption June

Transform to the power of digital

Adapting & Thriving in an Age of Digital Disruption

June 6th, 2014

Didier Bonnet

The many dimensions of Moore’s Law

Technology will continue to be the endless agitator of the business world

Loga

rith

mic

Sca

le

1,000,000,000,000,000

1,000,000,000,000

1,000,000,000

1,000,000

1,000

1

0.001

Hard Drive Cost Efficiency (gigabytes/dollar)

Microprocessor Transistors/Chip

Residential Internet Download Speed (kilobytes/second)

Supercomputer Speed (FLOPS)

Supercomputer Energy Efficiency (FLOPS/watt)

Year

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

In 5 years = 10 times as powerful for the same price

In 10 years = 100 Fold

Source: “The second machine age” – Andrew McAfee and Erik Brynjolfsson

Copyright © 2014 Capgemini Consulting. All rights reserved.

2

Digital is forcing a fundamental rethink of both strategy and operations

Is manufacturing ready for the digital challenge?

The imperative of leading digital transformation

% of Fortune 1000 Companies that are New

The second machine age will have as profound an impact on business as electrification

35%

75%

1973-1983 2003-2013

Sources: http://www.forbes.com/sites/nathanfurr/2011/04/21/big-business-the-end-is-near/ and Capgemini Consulting analysis based on Bloomberg & Forbes;


4

Winners at the Beginning and at the End Are Not the Same

Classic steam engine

powered factory

Machines supplied electric energy through common distribution

SUBSTITUTION APPROACH

TRANSFORMATION APPROACH

Assembly line powered by individual motors

First use: 1888-1895

First use: 1913

Large Steam Engine

Large Electric Engine

Use Technology to Transform, not Substitute…

Disruptors are rethinking assets and leveraging new forms of consumption

80 million power drills in America used an average of 13 minutes – does everyone need their own drill?

– Brian Chesky Airbnb founder

“Borrow the things you need from people in your neighbourhood within 30

minutes”

Retail Hotel Industry

Sources: http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-backers-think-its-more-valuable-than-hyatt/

Platforms Get Enormous Value from 3rd Party Developers

The “Sharing” Model The Open Platform Model

Ap

plic

atio

n 1

Ap

p. 2

Ap

p. 3

Layer 2

Layer 1

You don’t need to own this

Quantity

Pri

ce

Profits increase when others add to platform’s Long Tail

Most firm can only concentrate on most

valuable apps


5

10,0

11,8

15,0

Airbnb

Accor

Starwood Hotels

Select Hotel Valuations & AIrbnb

The digital economy is forcing us to rethink strategy with different assumptions


6

Digital eroded industry boundaries

No industry is immune from digital disruptions

New level of analysis: arenas, adjacencies

Entry barriers were based on the notion of asset intensity

Today, access to assets is key, not necessarily ownership

– Things that were massively asset intensive can now be done by borrowing / renting

– Provide flexibility & scalability without having to “bet the farm”

Start-ups can experiment at scale

Building a sustainable competitive advantage

Old assumptions New assumptions

Coders

Computing capability

Qualified specialists

Innovation Crowd sourcing

Flexible office space

In addition, different consumption patterns are emerging e.g. Sharing economy, EAAS……

Industry competition matters most

Information, automation and connected machines are removing traditional constraints and transforming operations


7

DATA-DRIVEN AUTOMATION

Process and Decision automation

Advanced physical automation

Artificial intelligence

BIGGER, BETTER, DATA

Mobile Social Location Sensor IOT

CONNECTED EVERYTHING

People to People Machine to People People to Machine Machine to

Machine

MEANINGFUL DATA INSIGHTS

Descriptive and predictive Analytics

Machine Learning & Artificial Intelligence

Digital technologies are providing the potential for huge efficiency gains in manufacturing operations


8

Reduced lead time

Improved safety

Reduced costs

Mass customization

Increased flexibility

Increased visibility

65% shorter lead times with

automated planning system

Using 3D printing, reduced

production costs to create

engine’s intake prototype

from USD500K to USD3K

Robots that line workers

can quickly train manually,

e.g. Baxter sold for USD25K

Customer supply chain visibility

platforms reducing support

calls/ emails by up to 80%

Autonomous

machines eliminating

repetitive injuries

Digital Operations

NikeID customization initiative

Sources: 1. Intel IT Performance Report, 2012-2013; 2. ABB Conversations, “Manufacturers employ robots to improve worker health and safety’, November 2012; 3. Ford press release, “Ford’s 3D-Printed Auto Parts Save Millions, Boost Quality”, December 2013; 4. Automation.com, “Harting researching optimized manufacturing processes”, February 2014; 5. Aberdeen Group, “Aberdeen Group, “Supply Chain Visibility Excellence”, March 2011

Apparel Company

Time

Putting these opportunities into a coherent digital transformation is the key: how Codelco transformed the mining industry


9

Codelco 2.0

Trucks driving themselves

Operations controlled remotely

Information shared real-time

Codelco 3.0 “Intelligent Mining Model”

Autonomous mining machinery / human-free mining

Integrated information networks and fully automated processes

From a physical-intensive model to a knowledge and technology-intensive one

Benefits

Operational Efficiency

Improved safety

Exploitation of caches of ore that are not economically feasible today

Extension of the life of older mines Real-time integrated

platform

Sensors: information capture

Dig

ital

Mat

uri

ty

Codelco 1.0

California Division of Motor Vehicles = 11.9 million credit card transactions

Target = credit card data and encrypted PIN numbers from 40 million credit and debit cards

But digital also has its dark side...


10

50

60

70

80

90

100

110

120

130

140

1972 1977 1982 1987 1992 1997 2002 2007 2012

19

77

= 1

00

Year

Private Employment Labor Productivity

Sources: “The second machine age” – Andrew McAfee and Erik Brynjolfsson http://europa.eu/rapid/press-release_MEMO-14-60_en.htm; http://www.cso.com.au/slideshow/541868/pictures_12_biggest_data_breaches_last_12_months/;

http://qz.com/212003/targets-traffic-still-hasnt-recovered-from-the-giant-data-breach/#/h/70781,3/

Private Employment and Labor Productivity

Man vs. Machines

Privacy

Google fined for collecting and storing personal data from Wi-Fi networks for its Street View application

European Union ruling on the right to be forgotten

Security




On average, manufacturing companies are still at an early stage in their digital transformation


12

Banking

Consumer Packaged Goods

Insurance

Manufacturing

Pharmaceuticals

Retail

High Technology

Telecoms

Travel and hospitality

Utilities

Average industry digital mastery:

Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012

Dig

ital

Cap

abili

tie

s

Leadership Capabilities

CONSERVATIVES BEGINNERS

FASHIONISTAS DIGIRATI

Manufacturing companies are making headways in their use of digital technologies… mainly in operations


13

54 %

OPERATIONAL EXCELLENCE CUSTOMER EXPERIENCE

Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012 Manufacturing- Digital Masters

Core process automization

Operations monitoring in real-time

38 %

83 %

100 %

29 %

Use analytics to target market and customers

Sell products & services

14 %

33 %

67 %

Manufacturing average

Leading digital manufacturers have opened a big gap in leadership capabilities


14

ENVISIONING AND DIGITAL LEADERSHIP STEERING AND ENGAGING THE ORGANIZATION

Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012 Top-performers (Digital Masters)


100 %

83 %

83 %

28 %

Aligned digital vision among executives and middle management

Roadmap for Digital Transformation

34 %

Coordinate cross-function and cross-company digital initiatives

38%

Promoting a Vision for the Future that Involves Digital Technologies

80%

47 %

On average, manufacturing companies lack foundational capabilities that are essential for a successful digital transformation


15

IT AND PLATFORM INTEGRATION DIGITAL SKILLS

Top-performers (Digital Masters)


75% 48 %

38 %

67%

100%

56 %

83%

100%

100%

39 %

39 %

43 %

Have a common digital platform for different business units

Have an integrated view on customer data

Have an integrated view on supply chain status

Have mobile skills

Have skills in embedded devices

Have necessary skills in leadership to conduct digital initiatives




Innovation challenges

Building a coherent digital transformation: the leadership challenge

Transformative Vision Shared Vision

Digital Tsar/ CDO Digital Units Investment Committees

Promoting Change Employee Participation Investing in Skills

Shared understanding Two-speed IT transformation

Chief Digital Officer at Starbucks

“IT and business need to have a highly trusting relationship and be both determined to do the right thing for the customers ”

“Boeing believes the future of the aviation industry lies in ‘the digital airline’”

Digital skill building is becoming a foundational competitive advantage


18

Plugging the Skill Gap

Innovative Recruitment Methods

Target Company

Acquisitions

Partnerships Incubating for

the Future

Training Programs

Made several Acquisitions of Mobile, Social and

Technology Firms

Partnered with Kaggle, a Platform for Data Prediction

Competitions

Partnered with Techstars for an Incubator Program

Launched an Employee Exchange Program

with Google

Gamified their Recruitment Process

Source: Capgemini Consulting, The Digital Talent Gap, 2013

Launched a Digital IQ training. Over 20,000 employees trained in 2 years

Implemented reverse mentoring programs

Launched an incubator program for mobile startups

https://www.google.co.in/url?q=http://grumomedia.com/clients/&sa=U&ei=rKF1U-__Geqw0QXY6IHIAw&ved=0CDEQ9QEwAQ&usg=AFQjCNFYpF6FkoI9jnKgzHruXnbZWhKnvw

https://www.google.co.in/url?q=http://www.freelogovectors.net/boehringer-ingelheim-logo-eps-file/&sa=U&ei=V6J1U8P9Nujt0gW7xIHQBA&ved=0CC8Q9QEwAQ&usg=AFQjCNFGTwmnr4ByAcWQYi5ld-lJQQc5ag

https://www.google.co.in/url?q=http://news.pg.com/press-release/pg-corporate-announcements/awards-season-kicks-peoples-choice-awards-walgreens-and-pg-&sa=U&ei=Eq10U8TZMMeZ0AXT0IC4BA&ved=0CC8Q9QEwAQ&usg=AFQjCNE2_wJLN0DpFzHGlaEmr-RRp9uTPQ

https://www.google.co.in/url?q=http://commons.wikimedia.org/wiki/File:L'Or%C3%A9al_logo.svg&sa=U&ei=y6R1U5WLCaTY0QXryoHgAg&ved=0CDkQ9QEwBg&usg=AFQjCNH7hhCzaOGxJCOH8dmDIKlb3lzF3w

https://www.google.co.in/url?q=http://commons.wikimedia.org/wiki/File:L'Or%C3%A9al_logo.svg&sa=U&ei=y6R1U5WLCaTY0QXryoHgAg&ved=0CDkQ9QEwBg&usg=AFQjCNH7hhCzaOGxJCOH8dmDIKlb3lzF3w

In a digital world, a rethink of organisation and resource deployment is needed…


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Build it yourself

Innovation process inside

Bet the ranch

Ownership is key

Resources strongly held in business

Fitting opportunities into existing structures

Capital budgeting mindset

Resources allocated by a central governance mechanism

Organise around opportunities

Real option mindset

Experiment & learn

Access is key

Leverage external resources

Open innovation

From To

https://twitter.com/didiebon

Documents

Adapting & Thriving in an Age of Digital Disruptionyour2.capgemini.com/siemens/files/2014/06/Vortrag-D... · · 2014-06-11Adapting & Thriving in an Age of Digital Disruption June